In Australian Securities and Investments Commission v National Australia Bank Limited [2020] FCA 1494 the Federal Court of Australia ordered National Australia Bank (NAB) to pay a civil penalty in the amount of $15 million for contravening section 31(1) of the National Consumer Credit Protection Act 2009 (National Credit Act) by engaging in a credit activity with ‘Introducers’ who did not have an Australian Credit Licence and were assisting NAB customers to enter into home loans.

NAB was also penalised for breaches of section 47(1)(a) and (d) of the Act: failing to do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly and not complying with the credit legislation.

NAB admitted that the Introducers either provided “credit assistance” within the meaning of section 8 or “act[ed] as an intermediary” within the meaning of section 9.

During the period relevant to the case (23 August 2013 to 29 July 2016) there were thousands of Introducers registered with NAB, but this case only concerned 260 loans introduced by 25 of them. 

In three cases, fraudulent payslips were provided by an Introducer.

During the Relevant Period, NAB had an incentive programme, known as the Star Sales Incentives (SSI) scheme. Under the SSI scheme, branch bankers and mobile bankers were rewarded on the basis of the number of loans they sold. Branch Managers were rewarded based on the sales performance of those they managed. The same SSI was paid regardless of whether a loan was introduced to NAB through an Introducer or by another NAB employee. 

The issue was identified as a result of internal whistleblower reports and after investigation, the matter was reported by NAB to ASIC.

There were no requirements for Introducers to be from particular industries aligned with the provision of credit activities or to have any particular qualifications or training. There were no uniform processes for the “on-boarding” of Introducers and this was generally done by the individual bankers or the National Referral Partner (NRP). There was no minimum level of due diligence required to be carried out by bankers and NRPs and no consequences for non-compliance. There was no formal training for frontline bankers regarding the programme including on what information the Introducer could provide.

NAB admitted that it engaged in conduct amounting to 260 contraventions of s 31 of the National Credit Act, which also involved 260 contraventions of s 47(1)(d) and at least one contravention of s 47(1)(a) of that Act.

A “headline” penalty figure of $21,900,000 was discounted by 30% to reflect NAB’s cooperation, its early admissions and the adoption of a remediation scheme and other mitigating factors.

There was also a penalty imposed of $200,000 for each of the three contraventions involving fraud.

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